Foreign Relations of the United States, 1977–1980, Volume XXVII, Western Europe

143. Telegram From the Department of State to the Embassy in the Federal Republic of Germany¹

212303.

Washington, August 10, 1980, 2137Z

For Chargé from Christopher. Subject: Kloeckner Contract for Sayansk Aluminum Project: Muskie–Genscher Letter. Refs: A) State 209893 (Notal);² B) Bonn 14954;³ (C) State 209802.⁴

1. Entire text Secret.

2. Embassy will have received Septel reporting on Undersecretary Cooper’s August 9 meeting with FRG Embassy Chargé Dannenbring regarding Kloeckner project.⁵ In light of very serious nature of this problem, and likelihood of announcement of contract within next few days, Chargé should request meeting with Foreign Minister Genscher at earliest possible opportunity to discuss this matter further, drawing on points made by Undersecretary Cooper, and to deliver message from Secretary Muskie contained in para 3 below.

3. Following is text of Secretary’s letter to Genscher. There will be no signed original.

Begin text.

Dear Hans-Dietrich

Your Chargé d’Affaires, Mr. Dannenbring, informed Undersecretary Cooper August 8 of your government’s decision to allow the FRG firm Kloeckner to conclude a major contract with the Soviet Union for the aluminum smelter at Sayansk, which the U.S. firm Alcoa and Kloeckner had previously planned to supply. Alcoa and Kloeckner had been on the verge of concluding a firm contract for this project at the time of the Soviet invasion of Afghanistan last December. Following that development, Alcoa decided to drop out of the project, after which the export license previously issued by the United States Department of Commerce for Alcoa’s participation was indefinitely suspended.

I am deeply disappointed and concerned over your government’s decision for several reasons:

— To begin with, we had received assurances from you and the Chancellor that the Federal Government would do nothing to undercut the measures which the United States had taken in the economic area in response to the Soviet invasion of Afghanistan. The President specifically mentioned the Alcoa project in his February 9 letter to the Chancellor and stated that “to preserve the impact of this withdrawal, it is essential that the place of the American companies not be taken by industrial firms elsewhere. I hope that we can count on German cooperation in this regard.”⁶ We were encouraged by your reaction to our presentation on this point, including the Chancellor’s statement to the Bundestag on February 28, 1980, that, “we are not stepping into transactions which the United States has given up.”

— Such a step will convey to the Soviets a message of vacillation and disunity on the part of the Western countries.

— This decision makes it extremely difficult for other countries such as Japan to prevent its firms from proceeding with similar projects with the USSR.

— This action is likely to be interpreted as indicating that you have decided to return to a policy of business as usual with the Soviet Union despite the continuing Soviet occupation of Afghanistan.

— Finally, the extension of a very large Hermes guarantee for this project demonstrates a degree of official support by the Federal Republic which we find most disquieting. The fact that the Kloeckner contract does not cover the entire arrangement which had been originally agreed upon between Kloeckner and Alcoa, on the one side, and the Soviet Union, on the other, does not seem to me to detract from the force of these points. This is, in any case, a fine, technical point which will not be understood in either your country or mine.

Both of our countries decided, after the invasion of Afghanistan, to take measures to convey to the USSR that their behavior was unacceptable and would lead to effects on both our countries’ relations with the USSR. While our views on tactics may have varied, the Federal Republic and the United States agreed that some actions would be necessary if the Soviets did not withdraw from Afghanistan.

More than eight months after their invasion, the Soviets continue to occupy that country and to carry out a bloody repression of the Afghanistan people. In these circumstances we have concluded that it is not possible to relax the sanctions we have imposed against the USSR.

The Kloeckner decision is likely to be interpreted as indicating that the Federal Republic has embarked on a different course, directed toward reestablishment of normal relations with the Soviet Union; that is surely the way it will be understood in Moscow, and the Soviets will doubtless seek to portray the agreement in this manner. This decision could also affect the attitudes of other countries and lead to a more general unravelling of sanctions.

For these reasons, we deeply regret your government’s decision in this matter. We believe the rationale as explained to us by your Chargé d’Affaires is shortsighted and fails to take account of broad Western interests. We hope the Federal Republic will reconsider its decision.

Beyond this particular episode, I would very much appreciate receiving your views on how the Western nations should now conduct themselves in their dealings with the USSR. I would be particularly interested in knowing what the Federal Republic’s policy now is on this subject, and what actions the Federal Republic now envisages taking toward the Soviets, in view of your government’s earlier statements of policy, and the USSR’s continuing occupation of Afghanistan.

With best wishes, I am,

Sincerely,

/S/ Ed

4. For your information: Secretary Muskie will telephone Genscher Monday, August 11, to call attention to this letter and underscore its importance.⁷

Christopher

1. Source: National Archives, RG 59, Central Foreign Policy File, D800401–0936. Secret; Immediate; Exdis. Drafted by Niles; cleared by Christopher, Vest, Cooper, EB, S/S, and S/S–O; approved by Muskie. Sent for information to Paris, Tokyo, London, Rome, USNATO, and Moscow.
2. Telegram 209893 to Bonn, August 8, reported that the Department had received information that a West German company, Kloeckner, had almost completed negotiations to supply an aluminum smelter and instructed the Embassy to verify this information with FRG officials and ask them to stop the deal. (National Archives, RG 59, Central Foreign Policy File, D800378–0891)
3. Telegram 14954 from Bonn, August 8, reported that the West German Foreign Office had informed the Embassy that the FRG Government had decided on August 6 to approve Kloeckner’s application for export credit guarantees, a decision that Genscher had personally approved. (National Archives, RG 59, Central Foreign Policy File, D800379–0645)
4. Telegram 209802 to Paris, August 7, reported that Muskie had given Laboulaye a letter to François-Poncet asking the French Government to reconsider its decision to allow Creusot-Loire to supply equipment for a Soviet sheet steel mill. (National Archives, RG 59, Central Foreign Policy File, D800378–1009)
5. Telegram 210611 to Bonn, August 9, reported on Cooper’s August 9 meeting with Dannenbring to discuss the FRG Government’s decision to provide Hermes guarantees for the financing of the Sayansk aluminium plant, in the course of which Dannenbring presented the West German claim that Kloeckner “had not taken over the project it originally planned with Alcoa, but was supplying equipment for a smaller, technically less advanced installation.” (National Archives, RG 59, Central Foreign Policy File, D800380–0480)
6. See Document 196.
7. Telegram 223829 to Bonn, August 23, conveyed a letter from Genscher to Muskie that responded to Muskie’s letter and their August 11 conversation. In his letter, Genscher defended FRG Government credit guarantees for the Sayansk project on the grounds that Kloeckner would supply a manually operated plant which would not substitute for the plant that Alcoa had planned to build, which included an automatic process control system that was subject to COCOM. (National Archives, RG 59, Central Foreign Policy File, D800401–0936)
   Telegram 231054 to Bonn, August 29, reported during Muskie’s August 26 meeting with Genscher, “the Germans wanted to emphasize harmony, and that they attached particular importance to these consultations as evidence of the closeness and essential soundness of our relationship.” The telegram also reported that “the Germans believed that maintaining a certain level of economic cooperation with Moscow could be regarded as a necessary basis for providing needed assistance to EE’s such as Poland. At the same time, the Germans agreed to consider further restrictions within the COCOM framework and emphasized that the FRG agrees fully about the importance of restricting sales of technology for projects of potential military significance to the Soviet Union.” (National Archives, RG 59, Central Foreign Policy File, D800413–1086)